Alphabet’s Gemini 3.5 Pro Faces Delay, Raising Questions About Competitive Position in AI Race

Key Points

• Google announced in May that Gemini 3.5 Pro would launch in June, but the model remains unavailable.

• Alphabet’s Google Cloud revenue increased 63% year-over-year in the latest quarter.

• The company is scheduled to report second-quarter earnings on Wednesday, July 22.

When Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) introduced Gemini 3.5 Flash at its I/O developer conference in May, it promised that the more advanced Pro variant would follow in June. That timeline has not been met.

According to Bloomberg, the flagship AI model is delayed by months as Google refines its coding capabilities—critical for enterprise adoption—and faces concerns that competitors like OpenAI and Anthropic may have surpassed its performance.

Following a peak of $408.61 earlier in the year, Alphabet shares closed at $346.77 on Friday, a 15% decline. While modest compared to broader market corrections, this dip highlights growing pressure on the company’s AI strategy.

Does this delay signify a broader competitive erosion? Gemini 3.5 Pro’s postponement is confirmed, but Alphabet’s financial performance suggests continued momentum. Revenue grew 22% year-over-year to $109.9 billion in Q1, marking 11 consecutive quarters of double-digit growth. Google Cloud’s revenue soared 63% to $20.0 billion, with operating income nearly tripling to $6.6 billion. Search & other divisions saw a 19%increase, driven by record search query volume.

Image source: Alphabet Inc

Development challenges and strategic priorities

The delay reflects technical hurdles in enhancing Gemini 3.5 Pro’s coding proficiency—a key differentiator in the enterprise AI market. Google has not disclosed a revised launch date, though the company emphasized ongoing testing of upgraded models and cost-effective scalability. CEO Sundar Pichai noted strong demand for existing Gemini models, with cloud backlog expanding to over $460 billion and usage exceeding 16 billion tokens per minute—a 60% increase in three months.

While the missed timeline raises concerns, Alphabet’s infrastructure investments remain critical to maintaining its AI leadership. The company plans capital expenditures of up to $190 billion, much directed toward supporting its AI operations. Analysts will monitor Q2 results, particularly cloud growth metrics and clarifications on Gemini 3.5 Pro’s timeline, for signals about future direction.

Investor outlook and valuation considerations

Alphabet trades at approximately 25 times forward earnings, reflecting expectations for sustained growth. A generational lag in AI models could strain its cloud dominance and search innovation. However, recent financials indicate resilience, with broad-based strength across revenue streams. Investors may view this delay as a temporary setback rather than a fundamental shift, provided execution continues on infrastructure and product differentiation. The upcoming July 22 earnings report will provide crucial clarity.

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